Following the August 2011 financial summit, the Government has now approved a range of consumer credit laws that are designed to protect financially vulnerable consumers from loan sharks.
The Consumer Contracts and Consumer Finance Act 2003 will be strengthened by including new responsible lending requirements where the borrower must be reasonably expected to repay the loan without substantial hardship, lenders must be honest and transparent in dealing with the borrower and advertising must not be misleading or deceptive and must comply with the Code of Responsible Lending.
This new code will detail the types of practices accepted as meeting the principles of responsible lending. Where lenders are not registered, as required by the Financial Service Providers Register, borrowers will not be liable for the costs of interest or fees. The extension of the “cooling off” period, from three to five working days, will ensure borrowers have made an informed decision about their financial assistance.
These changes to the law will create consistency for both lenders and consumers and prevent “desperate” borrowers from being trapped into a lifetime of debt. Borrowers can take some comfort that an improvement in disclosure requirements will ensure that they, due to their financial circumstances, are not preyed upon by unscrupulous lenders. However, this does not mean that borrowers shouldn’t exercise caution and diligence when engaging with credit companies. Prudent and conscientious decision making will always be fundamental when dealing with lending institutions.